Imagine having three children — two who are drama queens, and one who is calm and mature, as if there were another grownup in the family.

The first two might represent recent United Kingdom and French elections that sparked outsize moves in markets. Meanwhile, Germany’s upcoming ballot plays the part of the “strong and stable” child — to borrow a Tory campaign slogan that failed to resonate with U.K. voters.

German Chancellor Angela Merkel looks set to cruise to her fourth term, and the main question has involved which parties will team up with her Christian Democrats to form a governing coalition. Yet investors are still keeping an eye on the Sept. 24 federal election in Europe’s largest economy, says Seema Shah, a London-based strategist for Principal Global Investors. It could provide investing opportunities, even though it doesn’t look like a big market mover, she says.

The June vote in Europe’s second-biggest economy was a different story, as U.K. Prime Minister Theresa May’s gamble to secure a larger Conservative majority backfired, sparking a slump in the pound for several sessions. That came a year after the Brits voted to leave the European Union, shaking up markets worldwide. And voters in France, the No. 3 economy, triggered a global rally for stocks in April, when they gave now-President Emmanuel Macron a victory in the election’s first round.

“In the past year, the elections you’ve had in Europe — as well as in the U.S. — have gotten a lot of market attention, with at least before-the-election speculation that there could be a major change in policies,” Shah says.

On the other hand, neither Merkel’s Christian Democrats nor the Martin Schulz–led Social Democrats, the party polling a distant second, appear likely to alter the status quo in foreign or domestic policies.

However, there could be a buying opportunity in European stocks if Germany’s election campaign, described as “bland” and “boring” so far by the media, somehow starts to put traders on edge in its final week.

“If you do see any widening in spreads on Bund yields, or if there is some market concern growing about the German election, that’s an opportunity to get in, because this should not have a big impact,” Shah says.

Investors should buy the dips in European equities because more gains are coming, thanks to a favorable backdrop, she argues. The Stoxx Europe 600
SXXP, +0.00%
, Germany’s DAX
DAX, +0.09%
and other European indexes have been holding below 2017 peaks hit in May and June, but fresh highs will arrive in due course, says Shah.

She predicts that the European Central Bank will gradually taper its bond-buying program, a key stimulus effort, over nine to 12 months, with that process starting early next year. She forecasts no interest-rate hikes until 2019 and sees ECB President Mario Draghi possibly talking down the rallying euro, which has been a headwind for shares of European exporters.

“So putting that together, it’s a kind of slow, steady improvement for Europe. That’s the best kind of circumstances that you want for equity markets,” says Shah.

Popular U.S.-listed plays for betting broadly on European stocks include the iShares MSCI Eurozone exchange-traded fund
EZU, -0.18%
and the iShares MSCI Germany ETF
EWG, -0.21%
, which trade around 14 to 15 times predicted forward-year earnings, well below the SPDR S&P 500 ETF’s
SPY, +0.13%
multiple of 19.

Many strategists have been upbeat on European stocks’ prospects this year. While the Stoxx Europe 600 has fallen about 4% from its mid-May peak, it’s still up more than 5% for the year—and bulls aren’t throwing in the towel.

The index looks set to rise by year’s end to 400, according to a Barclays team of European equity strategists led by Dennis Jose. That implies an advance of 5% from the gauge’s recent print around 381.

The “primary culprit” for the decline from French election highs has been the euro rally, but that also creates buying opportunities, write Jose and his colleagues in a recent note. Domestically oriented companies such as bank and transportation stocks “stand out as key winners from euro strength,” and they should start to outperform, they note. On their list of domestically focused firms worth considering: German lender Commerzbank
CBK, +0.65%
, mail and courier service Deutsche Post
DPW, +0.11%
and airline Deutsche Lufthansa
LHA, +1.10%
.

The German election could buoy European stocks by simply getting out of the way.

The focus among investors is “currently, and quite rightly so, on the ECB, inflation, and geopolitical tensions,” Shah says. “Once the election is over, then it allows discussions that are happening around the world to continue.”

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